Q: Our financial assets are held in a living trust. But I don’t know if our home was ever transferred into the trust. Our real estate tax bill shows only my name and not the name of the trust. So we think we may have overlooked transferring our home into our trust.
Is it beneficial to transfer our home ownership from my individual name to the name of our living trust? And, what will it take to do that?
A: When it comes to most living trusts, the whole point of setting them up is to manage all of your assets in the event of your death. Inside the trust, the beneficiary will transfer seamlessly from you to whoever is your successor beneficiary. This saves time and money, since property inside a trust will not need to go through probate.
You probably went to the trouble of hiring and paying an attorney to help you create a will and a living trust. Then, you took the further step of putting almost all of your financial assets into the name of your living trust. You should definitely add your home to the trust.
Creating an estate plan helps organize your financial and real estate assets. You decide who gets what, and can arrange how your assets will be distributed after your death. Legally, the most essential part of your estate plan is a testamentary will, although a trust is extremely useful.
A will allows you to write down what your wishes are for your financial assets, your personal property and your real estate. If you want your children to get certain jewelry or personal items, you can write that down in your will. If you want your home to go to a particular family member or friend, you can dictate that as well. And you can decide how to split any money, stocks, bonds or other financial assets you might have in different institutions.
Now, some financial institutions allow their customers to designate the beneficiary on the account. When the owner of the account dies, the money or financial assets in the account automatically flow to the person designated by the owner. Most retirement accounts allow you to designate a beneficiary.
But people also die while owning cars, boats and mobile homes. And they often have jewelry, artwork and other items of personal property. So, you have to decide how to take care of these items. That’s where wills and trusts come into play.
If you decide to only use a will, after your death your family may need to hire an attorney and open a probate estate with the court. Once the probate estate is opened and the executor of the will is approved, the executor can distribute the assets owned by the deceased per the terms of the will. Probate can be costly and for this reason people tend to use living trusts.
It’s not complicated: You set up a living trust and then proceed to change the name of your financial assets into the name of the living trust. You don’t need to do this for any retirement accounts that have provisions for naming a beneficiary. But you would for your bank accounts and other investments that you might own. You might also want to put the title to your auto, boat and motor home into the name of the living trust.
When you die, the trust would still own those assets. But the successor trustee — the one you designated in the trust document — would handle the distribution of the assets without needing probate court to oversee what the successor trustee does.
You can see why wills and trusts play nicely with each other. You set up a living trust and place all of your assets in the trust (at least all of the assets that can be placed into the living trust). Then you write a will that comes into play if you missed something. Hopefully, you didn’t miss anything other than your house. But in case you do, the fallback position would be to use the will, open a probate case and allow the executor to transfer any assets you forgot to put into the trust.
So, if you don’t put the home into the living trust and you’re the only owner of the home, when you die, your heirs would have to hire an attorney to open probate. It’s far simpler to put the property into the living trust now.
Check with the local office that files or handles the recording of real estate documents to see if your home is in your trust. Many of these offices now have online portals that allow you to search for these documents. Sometimes you can search your name, your property address or your property’s tax identification and then see what documents pop up.
You’re looking for a document that might be a deed. It should show your name and the name of the trust. If you find something like that, it likely means that the attorney you hired prepared the deed and had it recorded or filed. If that’s the case, you’ll be set. If you don’t find the document, you might want to hire a real estate attorney to assist you in preparing the document and having it filed or recorded.
You can try to do it yourself, but if you get it wrong, you could really mess things up. Talk to a professional to get assistance and make sure you do it right.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)
©2023 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.